When American Airlines in 2009 debuted on the public stage its direct-connect strategy, director of merchandising strategy Cory Garner envisioned that by curtain call "100 percent of our indirect volume" would go through the technology.
More than two-and-a-half years later, the carrier remains in the first act.
"In aggregate," Garner said last week, "we're processing a run-rate of about one million tickets per year" through direct connect, which AA estimated for 2012 would represent about 2 percent to 3 percent of its annual travel agency volume and 1 percent to 2 percent of all AA tickets sold.
While Garner cited adoption among online travel agencies and noted "more interest from brick-and-mortar leisure travel agencies," he acknowledged that "direct connect penetration in the corporate travel agency market has been slow. It's a very difficult market to penetrate for lots of reasons, not the least which are currently the subjects of litigation."
AA in August 2011 gained public commitments from American Express and Hogg Robinson Group, both separately announcing agreements "in principle" to explore the carrier's direct connect by using GDS aggregation technology.
But even those pronouncements were pretty noncommittal, and progress in deploying the technology with the two mega TMCs also "has been slow," said Garner. Amex and HRG did not respond to requests for an update.
Putting aside large corporate TMCs, Garner said AA's direct connect technology is "in production on four continents" and has gone live with "a significant number of travel agencies."
Priceline remains "the current largest contributor of volume" through the program, he added. The OTA in July 2011 announced it was processing "over 1,000 tickets a day" through AA's direct connect, but declined this week to provide an update.
Then there is the case of Expedia. After temporarily losing AA ticketing authority amid disputes in early 2011, it entered into a new agreement through which it would "transition its American bookings to American's direct connect via integration services provided by a GDS," according to AMR's 2011 annual report.
A year later, neither AA nor Expedia has indicated that any such live transactions are being processed in that way. Expedia did not immediately comment on progress.
Despite being AA's two marquee direct-connect customers, neither Expedia nor Priceline appeared too enamored of the concept, judging from statements in public filings.
For example, Expedia in its 2011 annual report characterized AA's strategy as one in which the carrier is "requiring online travel agents to agree to connect directly to American Airlines' systems, rather than through GDSs."
Expedia's initial failure to agree with that requirement meant its "contract with American Airlines expired without renewal resulting in American Airlines' fares being temporarily removed from our leisure travel sites," according to the report.
"If other airlines pursue a similar distribution strategy, it could reduce our access to air inventory, reduce our compensation, result in additional operating expenses related to the development, implementation and maintenance of the necessary technology systems, increase the frequency or duration of system problems and delay other projects."
Priceline similarly indicated in its 2011 annual report that further pursuit by airlines of direct connections could cause the OTA to incur new expenses, give rise to system problems, delay other projects and reduce GDS incentives.
Other known adopters of AA direct connect are Vegas.com and Florida-based retail agency Costamar Travel.
Costamar COO Jorge Diaz in an interview last year said he expected to gain a powerful new tool for selling AA's ancillaries and tapping new revenues. To enable the direct connect, however, the agency modified agent workflow and spent tens of thousands of development dollars to accommodate bookings, all without a clear commitment for financial assistance from the airline to offset GDS incentives.
Like the other direct-connect users, Costamar did not return requests to speak with The Beat for this article.
While some previously had questioned whether AA would alter its direct connect strategy in light of parent AMR Corp.'s Chapter 11 filing, Garner reaffirmed the carrier's commitment.
"Direct connect continues to be a priority for us, as it always has," he said.
In other words, the show will go on.
Source: The Beat